TSN – Tyson Foods, Inc. – Bearish investors breakfasted on Tyson Foods’ put options this morning with shares of the world’s largest supplier of beef and pork declining as much as 7.9% to an intraday low of $15.68. Traders positioning for continued erosion in the price of the underlying stock picked up approximately 1,300 now in-the-money puts at the January 2011 $16 strike for an average premium of $1.25 each. Put buyers at this strike make money if Tyson’s shares fall 5.9% from today’s low of $15.68 to slip beneath the effective breakeven price of $14.75 by January expiration. Pessimists purchased more than 3,700 puts at the January 2011 $15 strike for an average premium of $0.88 apiece. Investors holding these contracts are poised to profit should shares plunge 9.95% lower to trade below the average breakeven price of $14.12 by expiration day. Increased demand for put options on the stock and rapid erosion in the price of Tyson’s shares helped lift the overall reading of options implied volatility 17.68% to a high of 35.21% today.

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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